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Update to Story on 7/6/16:
The FOMC meeting minutes revealed the Fed is concerned about slowing U.S. job growth and the long-term consequences of the Brexit result. According to the minutes, a majority of the policymakers still believed rates could be raised unless an economic disaster strikes America.
Original story follows…
The FOMC meeting minutes from the June 14-15 U.S. Federal Reserve meeting will be released at 2 p.m. today (Wednesday).
And because of the recent global economic uncertainty, investors will be paying closer attention than usual…
While a rate hike seemed possible in June, the uncertainty of the Brexit vote and poor job growth in the United States forced the Fed to keep rates unchanged in June. Rates have remained between 0.25% and 0.50% since the Fed raised interest rates for the first time in nearly a decade in December 2015.
And investors don't believe rates will change in July…
According to CME Group's FedWatch tool, 97.6% of the market expects interest rates to remain the same.
But the July FOMC meeting and June meeting notes are still important. They will provide not only an indication of how policymakers view the strength of the U.S. economy, but the global economy as a whole.
When rates were raised in December, the Fed wanted to implement four interest rate hikes for 2016. Now, the Fed has backtracked and plans on two interest rate hikes. But the FedWatch tool places a 0% probability rates will be raised from July to December.
And even after 2016, FedWatch only projects a 13.7% chance rates are increased in February 2017.
Still, there are important insights from the FOMC meeting minutes that will give investors a better insight on the true chances of a 2016 rate hike. Today, here's what else investors should look for from the June FOMC meeting…
As the July FOMC Meeting Approaches, Here's What We Know
On June 21, Federal Reserve Chair Janet Yellen testified to the Senate Banking Committee that the long-term prospects for the economy are favorable.
But Yellen also told the committee slow employment gains, weak productivity growth, and a sluggish inflation pace have caused the Fed to take a cautious stance. Yellen said that proceeding cautiously will help the Fed provide support for economic growth while it judges the strength of the markets.
But the biggest news investors will look for from the FOMC meeting minutes is what the Fed plans to do about the Brexit…
You see, the Fed didn't want to raise interest rates ahead of the Brexit vote. Increased interest rates would have added even more uncertainty to global markets.
And now that we know the results, it's important for the Fed to offer insight on its plans following the Brexit.
In an interview with Bloomberg published on June 30, Dallas Federal Reserve Bank President Robert Kaplan said the Brexit results will take "a significant amount of time" to unfold.
The problem, though, is that the Fed can't keep holding off rate hikes because of Brexit. It could take years or even decades before the consequences start to play out. So it's important that the Fed offers a plan on what it intends to do if economic conditions in Europe deteriorate.
Kaplan also acknowledged in the interview that markets don't believe the Fed will raise interest rates until 2017. Kaplan did say, though, he eventually expects some convergence between what the Fed is planning and what the market expects.
The Bottom Line: The June FOMC meeting minutes will help provide additional details on the Fed's 2016 economic outlook. Investors should focus on how much of a role the Brexit played into its decision to keep interest rates unchanged, as well as what the committee plans to do about the long-term consequences of the Brexit results.